ITO 33 (2)(2), MUMBAI vs. KALPESH DHIRAJLAL PATEL, MUMBAI

Shri Sanjay J. Sethi representing the Department submitted that the assessment for assessment year 2011-12 in the case of assessee was reopened on the basis of information received from DGIT (Inv), Mumbai. As per the information received, the assessee had obtained bogus purchase bills aggregating to Rs.15,96,010/- from six dealers, declared as hawala operators by the Sales Tax Department, Government of Maharashtra. During assessment proceedings, the assessee could neither produce suspicious dealers nor any confirmations from the said dealers were filed. No documentary evidence in the form of delivery challan, lorry receipt, octroi receipt, etc. were furnished by the assessee to show trail of goods. Since, the assessee failed to discharge his onus in proving genuineness of purchases and the dealers, the Assessing Officer disallowed 25% of bogus purchases and made addition of Rs.3,99,,002/-. In First Appellate proceedings, the CIT(A) restricted the disallowance to 12.5% of bogus purchases. Now, the Revenue is in appeal against the relief granted by the CIT(A). The ld.Departmental Representative prayed for reversing the findings of CIT(A) and confirming the addition made in assessment order.

On the other hand, Shri Vishwas Mehendale appearing on behalf of the assessee strongly supported the impugned order and prayed for dismissing appeal by the Department The ld.Authorized Representative of the assessee submitted that the assessee is engaged in manufacturing of PVC Compound/Granules. The disallowance made by Assessing Officer on alleged bogus purchases was very much on the higher side. The ld.Authorized Representative of the assessee contended that though the purchases were genuine, however, to settle dispute, the assessee has accepted the addition confirmed by CIT(A).

Both sides heard, orders of authorities below examined. Undisputedly, the assessee failed to discharge his onus in proving authenticity of suspicious dealers and genuineness of purchases made from them during the period relevant to assessment year under appeal. The Assessing Officer after accepting the sales turnover declared by assessee, disallowed 25% of alleged bogus purchases. We are of considered view that disallowance made by the Assessing Officer was on higher side. It is only the profit element embedded in such transactions that can be brought to tax. The CIT(A) has estimated suppressed profit margin on bogus purchases at 12.5% . The same has been accepted by the assessee. We find no reason to interfere with the findings of CIT(A), hence, impugned order warrants no interference.

In the result, appeal by the Revenue is dismissed, sans merit.